IG Markets - Morning Thoughts

It’s all about
equities printing record/cycle highs at the moment. This is
occurring as investors continue to respond to what seems to
be a concerted effort by central banks to ease, plus a
slight improvement in data from key economies. Ever since
Friday’s solid non-farm payrolls numbers, global data has
been on a roll, with China’s trade balance result and
German factory orders/industrial production impressing
yesterday. The single currency has perhaps been the biggest
beneficiary of the improving economic data out of Germany.
When ECB President Mario Draghi cut rates last week, he
emphasised the ECB is ready to do more should economic data
continue to deteriorate. As a result, the German data saw
EUR/USD spike to $1.3195 before a slight pullback into the
$1.316 region. AUD/USD enjoyed a strong bounce off its lows
in the $1.015 region yesterday, helped by the
better-than-expected China trade balance data. The pair even
managed to pop back above $1.0200 early in US trade, but
found sellers once again and continues to gravitate back
towards Tuesday’s lows. Today is another big day for the
local currency, with jobs numbers and China CPI all due out
at 11.30am AEST. The unemployment rate is expected to remain
steady at a three-year high of 5.6% with 11,500 jobs added.
Meanwhile, China’s CPI is expected to rise 2.3% which is
well under the government’s target over there and
therefore is fairly good for risk. Should the jobs data turn
out to be market friendly, then resistance for AUD/USD will
be in the $1.0222 region, while disappointing data will
probably see lows in the $1.015 region retested and possibly
breached.

Ahead of the open, we are calling the ASX 200
up 0.2% at 5208. The dominant theme in yesterday’s trade
was a rotation out of some of the defensive names and into
the resource stocks. Seeing investors come out of their
comfort zone is always a good sign, and might just be what
this market needs to keep the momentum going. A situation
where the banks and miners move higher in unison has been
rare this year and is exactly what this market needs to
breathe confidence into investors.

BHP’s ADR is
pointing to a 0.9% gain to 34.60, with iron ore back above
130. Gold/copper names should also be well supported after
the two metals enjoyed strong gains. The yield-play will be
back in focus today with NAB reporting its first-half
results. At first glance, the numbers look solid with the
cash profit of $2.92 billion coming in slightly ahead of
consensus at $2.91 billion. NAB’s dividend came in at 93
cents, which is also a touch ahead of estimates, but its net
interest margin might disappoint analysts after coming in at
2.03%. Some analysts were expecting a net interest margin of
2.07%. ANZ Bank goes ex-div today and therefore we expect to
see it underperform. News Corp (NWS) has beaten expectations
in its Q3 earnings report. The fact that shares rallied
nearly 4% in after-hours trade suggests good days in
Australia as well, and it should continue its strong
uptrend. Publishing and satellite broadcasting remain weak,
however strong results were seen in cable, TV and film. On
the headline Q3 EBIT grew 4%, around 10% above expectations,
while adjusted EPS beat consensus by a touch at $0.35. NWS
is a sold brand and ticks a lot of boxes for investors, and
despite paying a low 0.9% yield it remains a standout for
growth focused investors. Also keep an eye on Billabong with
reports suggesting it could see a revised bid under 45 cents
a share.

IG Markets
provides round-the-clock CFD trading on currencies, indices
and commodities. The levels quoted in this email are the
latest tradeable price for each market. The net change for
each market is referenced from the corresponding tradeable
level at yesterday’s close of the ASX. These levels are
specifically tailored for the Australian trader and take
into account the 24hr nature of global markets.

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